Mexico’s beer market is dominated by Grupo Modelo and Fomento Económico Mexicano (“FEMSA”), the makers of Corona and Dos Equis, respectively. In 2003, this duopoly controlled as much as 99% of the beer market share in Mexico.[1] Modelo produces Corona and distributes its beer through a chain of convenience stores owned and operated by Modelo— Modelorama. This popular chain of stores only distributes Modelo products. Anheuser-Busch InBev owns a 50% non-controlling stake in Modelo. In June of 2012, AB InBev agreed to purchase the remaining half of Modelo.[2] Similarly to Modelo, FEMSA produces and distributes its own beer—Dos Equis—through OXXO, a wholly-owned subsidiary of FEMSA. There are thousands of franchised OXXO convenience stores throughout Mexico, and they only sell FEMSA beer brands.

Through this system, FEMSA and Modelo maintain a firm hold on the beer market in Mexico that makes market entry cumbersome for new or smaller beer brands. SABMiller, which produces and attempts to distribute Miller Lite, MGD and Miller High Life products in Mexico, believes Modelo and FEMSA are unfairly restricting competition in the beer market within Mexico. Specifically, SABMiller and other independent brewers believe that Modelo and FEMSA are violating Mexican antitrust laws by displacing competitors through their exclusivity contracts with distributors, restaurants and bars.[3]

Mexican law, unlike the three-tiered system in the U.S., permits exclusive contracts between brewers and distributors, as long the effect does not displace competitors.[4] In 2004, SABMiller filed a complaint with the Federal Competition Commission (“FCC”) in Mexico alleging unfair competition stemming from Modelo’s exclusive contracts. In 2006, Mexico’s antitrust agency initially found in favor of SABMiller; but, on appeal, Modelo was able to get the ruling reversed, allowing Modelo and others to continue entering into exclusive contracts.[5]

In addition to complaints regarding the excessively centralized beer market in Mexico, some of SABMiller’s frustration appears to stem from the disparate treatment among Modelo and FEMSA and all other brewers. For example, a 2003 article from the Wall Street Journal reported that Miller, to enter and distribute its beer products in Mexico, faced significantl obstacles that were not experienced by its competitors, i.e. Modelo and FEMSA.[6] These obstacles included “…a ‘non-stop audit’ of Miller’s Mexican distributor; a 1998 raid because of a missing comma on a label; a two-week delay of Miller deliveries (presumably because of tax problems) affecting Miller, Pabst and Coors; [and] higher tax brackets for Mom & Pop stores selling competing brands in Nuevo Laredo.”[7]

In 2010, SABMiller filed a second complaint with the FCC claiming the country’s beer duopoly—Modelo and FEMSA— is unfairly restricting competition by offering payments, loans, and refrigerators to restaurants and retailers that agree not to serve other brands.[8] A review of this matter is still being considered by the FCC.[9] Further impeding SABMiller’s tenuous position in the bear market is the recent approval of the Modelo—AB InBev merger in Mexico; however, approval of the merger is still pending approval by federal regulators in the U.S.

As the large, international brewers continue the relative recent trend (last fifteen years) of consolidation, it will be interesting to observe how these select beer conglomerates compete for consumers, in the U.S. and internationally, during a period when consumption of sub-premium through super-premium beer products is in the decline. To capture more of this limited, declining market, one should expect beer corporations to look at the Mexican beer market as a case study on how to control the beer market in a country with less stringent antitrust regulations than currently exist in the U.S.